Slide notes:One of the early health plans started in 1929 when 1,300 Dallas school teachers formed an association and contracted with Baylor Hospital for twenty-one days of hospitalization annually for six dollars per year per school teacher . At the urging of the American Hospital Association, other hospitals around the country entered into similar agreements with local organizations . These became known as hospital service plans and were exempt from insurance regulations in most states . The number of associations grew, and by 1939, nearly 3,000,000 people belonged to a hospital payment plan . These plans would eventually come together and form the organization known as Blue Cross . Fearing loss of control over their patients, physicians began to form their own associations . In 1939, California physicians formed a prepaid plan that covered physician services . Other physician groups around the country organized similar plans and these eventually merged to form the Blue Shield Association . 7